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'Boomerang Buyers' Are Staging a Comeback

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“Boomerang buyers”—former home owners who have gone through a short sale, foreclosure, or bankruptcy in the past few years and are saving up for a down payment to purchase a home again—are coming back. They're expected to flood markets in some of the hardest hit areas for short sales and foreclosures in the coming years. For example, boomerang buyers are predicted to account for nearly one in every five home sales in the metro Phoenix area this year—double the projected U.S. rate.

Rising rents and the desire to own again now that the economy is more stable are driving many boomerang buyers to re-enter the market. They also want to jump in before interest rates and home prices climb too much higher.

But how soon they can jump back in will depend on the type of loan they had as a previous home owner. For example, boomerang buyers who had FHA loans may need to wait only three years if they can prove that a hardship, such as job loss or death of a wage earner, led to their foreclosure or short sale.

Borrowers have typically been required to wait five to seven years to qualify for another loan, but mortgage giants have begun to change their rules to allow home owners who underwent a foreclosure or short sale to qualify sooner. Those who underwent a short sale will likely qualify the soonest. However, not all lenders are participating, so borrowers will need to shop around.

Freddie Mac’s wait time is usually four years following a short sale or deed-in-lieu, and seven years after a foreclosure. Fannie Mae may require a seven-year wait for a foreclosure, but only a two-year wait following a short sale as long as the borrower can provide a 20 percent down payment.

The following markets have the highest share of boomerang buyers, according to John Burns Real Estate Consulting:

Riverside-San Bernardino, Calif.: 4.1% (percentage of all U.S. boomerang buyers in 2013)